Just a thought on z clauses......

Having reviewed a few tender documents recently and the horrors of z clauses within them I was thinking just how much the z clause industry is costing the economy? How much time/cost is involved in preparing (hashing?) the z clauses, which passes to x tenderers to their advisers then all of their suppliers and tier 2 contractors and there advisers and on and on and on......The cost must be horrific and to what end? Nobody says NEC3 contracts are perfect and in an unamended form will always address all client's needs, but one document I reviewed recently had 40+ pages of these things, even including a z clause that deleted a secondary Option (rather than just not select it in the Contract Data) - who had that brainwave? Do you really have the right starting point when you end up with amends bigger than the original contract? Do advisers actually listen to how their clients wish to do business and ensure that their requirement is met, or do advisers tinker for their own ends? And what does all of this cost the taxpayer I wonder in public sector contracts?

So here's a (brave) thought for the second half of 2015.....

Clients about to engage advisers to write reams of z clauses.....stop. Don't do it. Leave the contract as is, give half of the money you would have paid the advisers to charity and invest the other half in making sure the Works Information (for ECC, Scope etc for other NEC3 contracts) is a quite brilliant document. This will lead to better behaviour, lower tender costs, sensible contract management and a better industry.....who's first up to give this a real go and let us know how you get on?!

Z clauses....thinking about them from a different angle (part III the decision)

Having established the mischief then justifying the need to address it, next we need to make a decision and perhaps test it.

So does it stack up (perhaps sometimes financial appraisal only will not justify the need) and shall we put this into effect? Do we really need this in a one-off contract or could we elevate it somehow to a barrier to entry to working with our organisation - if you (as supplier) cannot demonstrate this or have done that then unfortunately there's a mis-match and we cannot do business together. Policing issues at this level should be far more effective than trying to make it happen with countless contracts. Surround yourself with suppliers that should give you the best service possible.

Once you've made a decision that perhaps a z clause is needed why not test this - why not ask tenderers to offer a price with and without this z clause. What if this causes the tenderer to significantly increase his tender total beyond the level you thought it would? How will you otherwise ever know?

There are loads more things you could look at here but you think there is justification, you need to make a decision to effect the z clause but possibly have one more chance at tender stage to test the financial impact this brings to tenderers.

After this, you can only measure what impact this has and consider the applicability of this for future contracts. As usual, be careful what you wish for!!!

Z clauses....thinking about them from a different angle (part II the justification)

Having established the mischief and everyone being comfortable with that, I wonder if we can bring a simple scientific test to help justify the need.
Hopefully there are challengers in the drafting team and we are not letting people loose with blank cheques to write z clauses, so the challenger(s) says:
1. What is the likelihood of this mischief actually occurring on this project (somewhere between 0% and 100%)?
2. What would be the severity of this if it did occur (try not to complicate, 1st go at this just think about additional cost the client might be put to) - order or magnitude, is it £1, £100k, £1m or something else?
3. What would be your fee to write the z clause, write a corresponding guidance note and set of flow charts so all are completely clear what it addresses and how it fits into the rest of the NEC3 contract?

You must by now know where by stealth I'm going here.....if 3 in £££ will cost more than the £££ of 2 x the % of 1 then only the z clause salesperson will be better off. It would be cheaper to give half of the sum of 3 to charity and can the proposed z clause.

So this part of the note is making sure there is justification, the proposed z clause not only has merit but also is financially prudent. Funnily enough, this is now looking like a business case!

Z clauses...thinking about them from a different angle (part I the mischief)

I think I must be getting punch drunk not only on z clause discussions but on similar themes too. Many discussions are along these lines....

'We need to include a z clause for this particular bit of legislation.
Why?
Because we need to be seen to take it seriously (and of course they mean to take it seriously)
But how and why will a z clause saying you have to do what you have to do because statute says so make any difference at all in your contract?
Silence.
We just need to include this in our contract'

So in this line of questioning (where if you keep asking why you may just root out the mischief) we failed to discover the particular aspect of a piece of legislation for which there may not be a contractual remedy to run alongside some other remedy available to that party. If we could uncover that particular mischief then we can get our heads around the problem and decide a sensible way forward. Just randomly pointing to something in the hope everything will work out just fine is naïve at best.
So this note, part I, is about actually establishing the mischief you are trying to decide whether or not you need to contractually (or otherwise) address.

Student NEC dissertation

Dear all,

Another student's questionnaire for you to complete at lunchtime if that's ok! In his own words....

"I am currently completing my MSc via Leeds Met the final part of which is my dissertation. I am going to do it on NEC3 and in particular bespoke Z Clauses. I have prepared a questionnaire which I am struggling to get responses to. Would you mind having a look at it and possibly completing it. Also if there is anyone you know suitable to complete it please forward it on. All in all it should make a good piece of research particularly as I feel Z clauses do not help or improve NEC3 in many instances."

Thanks in advance,
Rob

https://www.surveymonkey.com/s/TTG2YPR

UK Govt Z clauses - fair payment

See link below to updated UK Govt Z clauses for consideration in any public procured contracts. Z1 and Z2 are slightly modified (replacing OGC with ERG), Z is as was (but in the process of being updated currently), Z4 is on hold (!) and Z5 is a new clause dealing with fair payment. That's more than enough Z clauses for anyone.....!

Rob

http://www.neccontract.com/amendments.asp

z clauses v Works Information

I see quite a few examples of very poor tender documents indeed - both in terms of conditions of contract (Contract Data with z clauses) and the brief (Works Information). The z clause part of the document is often very extensive indeed, to the point of wondering why bother using an NEC3 Contract at all. Apart from tackling this, I'm curious as to what users think is a realistic and sensible split of time/cost spent between preparing lets say z clauses against the Works Information, assuming NEC3 ECC is the contract chosen.

Although each contract/project has its own constraints/risks etc, I believe the intelligent client should probably spend 10 or 20 times more time/cost on producing a high quality, clear and comprehensive Works Information as opposed to z clauses. I sense the reverse is often too - that has to be madness!

What do you think?

NEC3 contracts do not refer to CDM - so what?

A few times now I've had discussions with legal advisors asking why NEC contracts do not refer to certain UK statutes, CDM in particular. I can't really level with this apparent craving to refer to certain UK statutes in contracts. Why should a contract refer to any UK statute, it's not exactly an opt-in, opt-out set of rules? The exception that I can see are those statutes that do need complimentary provisions such as provided through Y(UK)2 or those that are a sort of opt-in, such as provided for in Y(UK)3.

I refer to an article printed in ribajournal.com linked below (to scroll down touch on the red vertical line, which took me a while to discover!!):

http://www.ribajournal.com/index.php/feature/article/why_make_life_more_complicated/

Anyway, in there it states "... the PSC does not contain specific provisions requiring the consultant to comply with the CDM Regulations. Clients therefore generally tend to insert a Z-clause to this effect (even though a consultant would be required to comply regardless of whether or not a provision had been included)..."

So, this looks like legal advice to me, you have to comply with UK statute. If anyone thinks a single sentence in a contract actually makes people design/build safer I think they are wrong. So can someone please tell me why on earth we can justify padding out contract terms with unnecessary references to UK statute that apply anyway?

Rob

NEC student research

Dear all,

Another questionnaire from a student who would appreciate your considered input. This time on the dreaded z clauses!

Many thanks,
Rob

http://www.surveymonkey.com/s/CHLNSDS